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POLICY: What’s right about Krugman? What’s wrong about Don Johnson?

Krugman’s series on health care continues in the NY Times and no doubt Don Johnson (over at BusinessWord) will be fulminating over this too. Don got a little offended when I called his stance mean. Don is a sensible guy and understands health care well, even if we disagree on on policy and politics.  So what do I mean by "mean".  Let’s ignore the fact that Don thinks that moderate social democrats like Krugman and Uwe Rhienhardt are the hard left — any observer of real politics would be giggling at that one.  I mean have they seriously suggested nationalizing health care delivery? No. Let alone nationalizing steel, autos, oil, and even agriculture.  (Yup, Don, that’s what the "hard left" from Lenin to Bevin did.  By his standards FDR was a Bolshevik).  But let’s look at Don’s opinion:

"I guess it’s ‘mean" to advocate regulated free markets that:
1. Help us have the lowest unemployment levels and lowest income taxes.
2. Give people who take the time to become educated, find rewarding jobs and seek out health care providers they like the freedom to spend their money on health care, if they think that’s important.
3. Try to minimize the role of centralized governmental planners who’ve never successfully created a health care system that cares for everyone in the country and makes everyone happy.
4. Give everyone incentives to earn the money needed to buy the best health care they can afford.
5. Not force wage earners to pay for the health care of strangers who could buy their own insurance if the politicians weren’t so good at giving everyone else’s money away in exchange for votes of the unthinking left."

The problem with this rhetoric is threefold. First, even if one accepts that we have "regulated free markets" in the rest of the economy and all those commies in Europe, Canada and Japan don’t, no one can seriously maintain that health care is a regulated free market like, say, buying groceries. It fails all of Adam Smith’s sniff tests for being in a state of perfect competition, and any serious student of the subject only has to read another Princeton hard lefty Paul Starr to know that the combination of vigorously pursued professional hegemony and third-party payment has left us with a system run by providers of various types, mostly for their own benefit.  So health care isn’t a regulated free market and people aren’t in a position to "spend their money on health care, if they think that’s important" the way any rational economist would understand–even if the vast majority of people didn’t have third party payment to cover that spending — which they do.

Second, Mark Pauly, a health care economist who is in Don’s camp wrote a hysterical piece in Health Affairs a few years back suggesting the reason we were so inefficient in our health care spending and spent so much on it, was that we were so efficient in the rest of the economy —  and could therefore afford to act like drunken sailors when it came to health care. I never understood why just because we had (apparently) lots of money to spare because we are a rich and productive nation, we should spend it all on a very inefficient health care system rather than, say, on Frappuchinos, education for first graders, or invading foreign countries which don’t have anything to do with us. There is no rational connection between the overall economy and how we choose to allocate resources to health care.  How we allocate resources to health care, and how much we allocate, is largely a political question. It’s directly political (in the 50% that the government pays for) and indirectly political in how (in order of importance) the government treats the taxation of health benefits, how it controls the industry’s pricing and capital spending, how it encourages its citizens to allocate their resources, and how it allows lawyers to persuade doctors (and doctors to persuade doctors, and drug companies to persuade doctors) that more care rather than less care is better. What any of that has to do with overall productivity in the economy escapes me. Finally while it may be a nice idea that health care is a luxury good that consumers will buy on the margin in preference to other luxury goods, that is not how we’re buying it yet and won’t be for quite some time.

But the third issue is where I call Don mean. Politically we have a straight choice.  We know that the costs of the health care system fall disproportionately on the poor and the sick.  And we also know that access to health insurance coverage is lower among those groups. Suggesting that people could voluntarily buy health insurance but just aren’t doing so is in my opinion total BS, and appears to be backed up the the opinions of America’s employees who are desperate to maintain their health benefits from their employers. Further we know that those without health insurance struggle mightily with the costs of care, and many more of them are in trouble than their equivalents in other countries where their access to coverage is subsidized by those people paying those high taxes that Don obsesses about (something else that needs to be refuted in another post).

You may recall that in the last couple of years we’ve had the ability give big tax cuts to the rich, and to spend nearly $100bn a year invading Iraq. The money that went on either of those political initiatives would have easily covered expanding health insurance coverage for those at the bottom end of the social ladder. In general you’re either for this or you’re against it.  And I think that, knowing the consequences of not having insurance on the health and wealth of those without it, to take the "against" position is mean.

 

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irbpoltroonsean mccrayJCDavid Hansen Recent comment authors
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irb
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irb

I’ve been reading your blog and find many clear headed thinkers who are trying to tackle the problem of health care. In my observations I have noticed many problems about healthcare. Cost is just one of them. Insurance costs a lot. Not having insurance costs a lot. Medical Malpractice insurance costs a lot. Defensive medicine costs a lot. Drugs cost alot. Social ills cost a lot (i.e. alcohol, illegal drugs, smoking). As patients, however, we’ve become disassociated from these costs other than to know everything is damn expensive. Healthcare is a hard nut to crack. Lots of people have their… Read more »

poltroon
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poltroon

Health care isn’t just a nice-to-have, it’s also a national and local security issue. That guy walking around with a communicative disease? We want him isolated and treated even if he can’t afford to pay. When trauma centers close because they treat too many uninsured patients, even the wealthy are faced with 20-30 minute ambulance rides instead of 5 minutes, minutes that matter. We provide a free education to every child in America. Why not free health care? Having health care tied to employment won’t help you if you or your child becomes sick, and you have to quit your… Read more »

sean mccray
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sean mccray

maybe it sjust me, but where is there any substnce in the Krugman article? he doesnt say hardly anything, other than we pay too much, and we have too many private interests. He says NOTHING. He guesses at the number of people who work for health care, but have nothing to do with health care. Are you serious? this article would not pass a laugh test for a high school paper. An editor would ask for some factual basis. Please explain to me, why a system that provides the best care in the world to at least 80% of people,… Read more »

sean mccray
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sean mccray

sorry,
i didnt think an intelligent response was actually called for. Since I saw someone agreeing with Krugman, and also using that same old tired “tax cuts for the rich line”
guess what. I didnt have insurance for years, because i didnt want it! I saw no need, i was young and was never sick. Why waist my money. People do choose not to have insurance.
since our health system is not truly capitalistic, whe shoudl therefore continue the non-capitalistic reforms??? Those have been working really great, havn’t they????

JC
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JC

Wow, I’ve missed a lot! This a real good thread. First off, I do believe in many areas health care is a “regulated free market”. I won’t say that UK, France, & Spain do not have free markets in the health care arena, but Canada sure doesn’t. There are a proliferation of 3rd party payers but the majority of those payers are gov’t sponsored (Medicare, Medicaid, SCHIPs programs, military, etc). The expenses and costs in these single-payer models have increase as dramatically over the same time as private insurer’s experience. So to say that a sole government model is the… Read more »

gadfly
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gadfly

Also, information needs to come to the incompetent people, since they may be too incompetent to find it.
I just found a really great site for discreetly finding out if you are eligible for government benefits:
http://www.govbenefits.gov/govbenefits/index.jhtml
It would have been nice to have known about this a year and a half ago…

John P.
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John P.

Don:
Thanks for clearing up the bit about incompetence.
Actually, in a market-based system, I feel all incompetents should be given some sort of coverage – regardless of the source of their incompetence – at least for the short term.
Incompetent cell phone salepeople, accountants and realtors who find themselves out of work should all get some sort of temporary respite.
Why not give the incompetent 90-days of coverage?
I think this could help the economy tremendously.

gadfly
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gadfly

Don – I believe you left out the corollaries: //those who refuse to take jobs that are beneath them// There is no Uber-Employer allocating jobs. People aren’t often offered jobs that are beneath them. Employers will reject them as “overqualified”. And that’s a good thing, because it’s a waste for society as a whole when people aren’t working to their potential. One of the virtues of a free society and a market economy is that people will strive to use the skills the have. //or won’t pay what they think they’re worth,// Are you saying businesses should be empowered to… Read more »

gadfly
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gadfly

LOL – Abby, I had the same reaction about the Vet, but your argument sounds smarter. Have you considered law school?

Donald E. L. Johnson
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Sorry if I didn’t make myself clear. By incompetents, I mean mentally incompetents. About 10% of the population are mentally incompetent due to low IQs, severe mental illness or substance abuse. They are poor because they are unemployable, and they are unemployable because they are incompetent. So we can’t expect them to be able to afford health insurance. They are, for the most part, wards of the state. We are at or above full employment at 5.4%, compared historical unemployment rates, except for a few temporary spurts. Unemployed people include those who are between jobs, those who refuse to take… Read more »

gadfly
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gadfly

//using the vet example// This is a great examply…but it leads to the conclusion that sometimes the trouble, the expense, and the wish to spare pain leads to your pet being put to sleep. I’m getting creeped out by the idea of a doctor coming into the room to say “here’s the bill for you’re elderly aunt – you clearly can’t afford it, and she’s in a lot of pain. Perhaps you should consider putting her to sleep.” *shiver* //10 upper middle class families that I encounter either in upscale social settings // I know it’s realistic that a problem… Read more »

Abby Vigneron
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Sue–One reason that malpractice for vets is cheap is that, as a legal matter, pets are just property. I bet that it’s pretty high for vets treating Kentucky Derby champions. But your pure bred lab is only worth a couple thousand dollars, and if it’s in really bad shape it gets euthanized. Not so with humans, at least not yet.

Sue
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Sue

David, you are making the exact point I’ve been trying make. The system is broken and abused by both users and care providers. I keep using the vet example because I’ve gone through a series major medical issues with family pets and always gotten good visibility into choices and costs prior to making decisions. My vet can tell me what an operation, blood work or ultrasound costs by simply looking up the pricing on her computer. There was never bill confusion or really any confusion in treatment options. With good IT, a visible cost structure (vs. a reimbursed coding system… Read more »

David Hansen
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David Hansen

I posted the following on Don’s, but I’ll post it here as well since there seems to be lots of debate in THCB: ___________________ I’d like to point out the silliness of the “government bad, markets good” debate that Don seems to be waging with Matthew Holt. Both are tools and, as with all tools, use of them can produce good or bad outcomes (e.g., a hammer can be used to build homes or to kill). As tools, goverments and markets need not be in opposition, but can complement each other. In fact I see greatest strength in the American… Read more »

gadfly
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gadfly

//right now they have a perfect market with rigged pricing and little consumer discretion in terms of shopping on price.// Part of the problem is that society is complex, and it’s hard for people to keep up with the basic demands of life. This is the small print problem: people are legally presumed to be competent to read the small print, but businesses take advantage of the reality that people have to ration their time. This is what makes me think that more transparent pricing (for dentists as well as physicians, please!) isn’t going to help all that much. I… Read more »